Context:
The Reserve Bank of India (RBI) reported an 8.2% growth in its balance sheet, reaching Rs 76 lakh crore in FY25. A key focus of the central bank is to bolster resilience in its foreign exchange reserves, which now constitute over 74% of its total assets. This comes amid rising concerns over the “weaponisation of reserves,” where countries face financial sanctions freezing foreign-held assets during geopolitical conflicts.
RBI’s Foreign Exchange Reserves and Risk Management
- Current Reserves Size: India’s forex reserves rose by 3.4% in FY25 to $668 billion, following an 11.7% increase the previous year.
- Diversification Strategy: To mitigate risks associated with global conflicts and financial market shocks, RBI emphasizes diversification across asset classes, currencies, and jurisdictions. Currently, a large share of India’s reserves is invested in US dollar assets, primarily US Treasuries.
- Objective: The diversification aims to ensure safety, liquidity, and adequate returns while protecting reserves from geopolitical and market vulnerabilities.
Digital Infrastructure and Data Security Initiatives
- RBI plans to launch the Indian Financial Services (IFS) Cloud in 2025–26, developed by its subsidiary IFTAS.
- This community cloud service, designed exclusively for RBI and regulated financial institutions, aims to enhance data security, operational efficiency, and compliance with India’s data localisation regulations.
- This move comes in response to increasing cyberattack threats targeting domestic financial data.
Promotion of the Indian Rupee in International Trade
- To reduce dependency on major currencies like the US dollar, RBI encourages exporters and importers to settle trade transactions in Indian rupees.
- Special emphasis is placed on using the rupee through mechanisms such as the Asian Clearing Union.
